Clouds gather over economic expansion. After galloping along for the past two years, the global economy is showing signs of weakening, with the United States, China and Europe all facing the rising threat of a slowdown. Few economists foresee an outright global recession within the next year. But the synchronized growth that powered most major economies since 2017 appears to be fading. The risks have been magnified by the trade war raging between the United States and China, the strife dividing Britain over an exit from the European Union and the Federal Reserve’s continuing interest rates hikes. Thus the clouds gather over economic expansion.
The Fed is expected next month to raise its key short term rate for the fourth time to control inflation. But they also make loans costlier for consumers and businesses “We can’t continue to grow this fast for much longer without risking inflation, ” Adrian Cooper, chief executive of Oxford Economics, said of the still solid U.S. economy. “That’s ultimately what the Fed is trying to achieve with its steady movement in interest rates. The skill is to do so in ways that don’t create a big downtown.” The concerns have grown enough that Larry Kudlow, President Trump’s top economic adviser, on Tuesday dismissed the worries roiling the markets.
The collective growth of the world’s major economies in the past two years was broadly welcomed after a feeble recovery from the 2008 financial crisis. Yet few economists saw accelerated growth as sustainable, or even desirable, over several years. The concern is that a prolonged global expansion could ignite inflation or speculative investing that would inevitably send vulnerable economies into a downturn. Compounding the challenge, the world’s economies are linked more than ever through trade, finance and investment , so as to the point that a rupture to one major nation tends to spread across the globe.
Over the next two years, most forecasts suggests that U.S. growth, after cresting above 3 percent this year–its best performance since 2005–will weaken. Fed Chair Jerome Powell acknowledged in a speech last week that the strong worldwide growth of 2017 is in retreat.